Justice Is An Economic Input

EVERYBODY knows that justice is a basic need. But not many think of justice as an economic input. Yet no economic reform, including the one India has embarked on, can succeed fully without judicial reform. Justice is as essential an input for liberalising economy as deregulation or globalisation.

The World Bank and International Monetary Fund (IMF) never tire of laying down conditions on trade, budgetary policy, monetary policy, industrial and financial policies. They say this will lead to greater efficiency, prosperity and social justice. Yet, they ignore one reform without which the rest of the package can fail—judicial reform.

The fundamental aim of liberalisation is to empower people, both as producers and consumers, and thus harness their innovativeness and energies for the national good. Liberalisation empowers people to take up any profession or business. This means, for instance, that there can be no government monopolies on bus routes, tourist huts, or mutual funds—any person should be able to enter any field without encountering hurdles and demands for bribes. Liberalisation empowers people to invest where they want, without being told that they must go to such-and-such place and produce just so much of such-and-such thing. It means that consumers are not forced to buy goods from a tiny handful of callous, inefficient businessmen or government agencies, and can buy from any supplier, Indian or foreign. As long as a consumer has no choice in purchases, he is powerless and power resides in the few suppliers. The moment the consumer gets the power of choice, he can bankrupt the biggest company or government agency by simply taking his custom elsewhere. By empowering people, liberalisation gets the most out of their talents as producers and gives them a fair deal as consumers.

CAVEATS: Two major caveats are necessary. First, the state must also provide free education and health to empower the illiterate and sick, and create safety nets to empower the poor. This caveat is often made, rightly, by the left. The second caveat is that the state must provide rapid and effective justice to ensure that everybody follows the law, and that offenders are caught and punished. Few people on either the left or right emphasise this as a basic economic reform. Yet, without it, liberalisation cannot hope to truly empower people as either producers or consumers.

There is an old saying in north India, jiska danda, uski bhains (he who wields the staff owns the buffalo). This underlines the fact that in traditional Indian society, property rights depended on force, not on law or justice. Where property rights are not secure, it makes little sense for any peasant to invest his money or efforts in ventures whose fruit will be snatched away by the upper castes of the village, by goondas, or even the police.

Empowering the individual through liberalisation implies the disempowerment of those breaking the rules to enrich themselves. That, in turn, depends critically on a functioning system of justice. Unfortunately, the system we inherited from the British Raj is in decay. Crooked politicians and businessmen are in league with gangsters to pervert the law and rob the society. In Bihar, where, governance has collapsed and private armies rule, it makes little sense for anybody to invest in the absence of working mechanisms for enforcing contracts or protecting the fruits of one’s labour and innovation. That is why Bihar remains mired in stagnant poverty.

Liberalising the economic rules of the game will have no impact at all in that state as long as musclemen can defy the rules of the game.

We need a society where big farmers get rich by increasing their productivity, not by stealing the produce of Harijan neighbours; where businessmen get rich by supplying cheap, high quality goods, not by arranging cosy monopolies in league with politicians.

A functioning justice system is as necessary for empowering consumers as producers. If a supplier can pass off sub-standard goods on a buyer, who is unable to gel redress quickly through the courts, liberalisation has not resulted in empowerment. If consumers faced rigged prices from cartels (who have the clout to prevent the government from permitting competing imports), they will not benefit from liberalisation.

SHIFT FOCUS: Mr Narasimha Rao and Dr Manmohan Singh have spent much time and energy on reforming industry and trade. They now need to focus on reforming our barbarous police-judicial system, which protects? crooks with financial and political clouts through sheer callousness, corruption and delay.

Judges are fond of saying that justice delayed is justice denied, after which they will issue endless stay orders and adjournments. The police dance to the tune of their political masters instead of enforcing the law. As I have said in earlier columns, we need a change in the Constitution to reduce the powers of politicians and increase those of autonomous investigative and judicial agencies.

We also need radical new laws which recognise that judicial delays are as much as a perversion of justice as ignoring evidence. And legal procedures must be changed to give everybody an incentive to speed up verdicts and penalise delays. This will be inconvenient for lawyers who have fattened on the existing system, but they must be tackled firmly as people who have perverted our system for personal gains.